Building BRICS

Dubbed ‘new superpowers’ by the media, the ‘Bric’ nations are 21st Century global players whose geopolitical clout stems from the large and growing sizes of their populations and economies. Investment, trade, loans and aid flows increasingly link Brazil, Russia, India and China with other nations.

This article explores the global power and influence of each Bric nation in turn, focusing in particular on their growing presence in Africa and the recent landmark decision to invite South Africa to attend the 2011 ‘Brics’ summit. We also ask whether the Bric nations appear to be allies or adversaries within the wider context of growing global land, water and resource scarcity.

Key terms

Climate security A measure of the threat that climate change poses to the livelihoods and welfare of a nation’s people.

Energy security A measure of how threatened a nation feels in terms of being able to meet its own energy needs, either through self-sufficiency or using dependable imported supplies.

Foreign direct investment A financial injection delivered by a transnational corporation into a foreign nation’s economy (for instance, when building a new overseas factory).

Hard power The military might that superpower states possess.

Rebranding Re-developing a place to change its image and / or functions in order to attract new rounds of investment.

Soft power The non-military means, such as control or manipulation of the media, by which a superpower maintains a worldwide ‘status quo’ in support of its own continued dominance.

Superpower hegemony The non-coercive means by which a major power like the USA builds a global consensus in support of its own dominance (for instance, using the ‘soft power’ of its media).

Trade bloc A group of states that build a common market through the abolition of border tariffs.

The acronym ‘Bric’ was coined by Jim O’Neill of Goldman Sachs in 2001 to highlight the growing geographical significance of Brazil, Russia, India and China (home to almost 3 billion people, they are the world’s four largest emerging economies). Since then, China and India have sustained breakneck rates of growth (around 10% per annum) despite the global economic downturn that began in 2008. Each Bric nation is currently following a strategy of global expansion within which the African continent plays an important role.

Commentators have sometimes characterised the overseas actions of the Brics, especially in Africa, as a "resource grab". However, this is an over-simplification of events. The Bric nations are also securing new markets for their products, or are seeking to build new business partnerships ( to develop overseas infrastructure and power grid projects, for instance).

Brazil, Russia, India and China are increasingly characterised by the media as ambitious new challengers to an established world order built around the superpower hegemony of the USA (and, to a lesser extent, the EU). In this article, an investigation is made of each Bric nation in turn that examines evidence of their interdependency with other countries. This article uses data drawn from newspaper reports filed during 2011, especially stories detailing Bric investment in Africa.

Brazil is the world’s fifth biggest economy, having recently overtaken France and the UK (thanks to an impressive economic growth rate of 7.5% in 2010). Incomes have risen substantially in recent years, with 105 million people - around half the population - now designated as ‘new middle class’. Brazil’s newfound wealth derives in part from the growing global reach of its industries.

Brazilian companies such as these are increasingly active in African markets:

Brazil's rising demand for raw materials means that African countries have become important trading partners for the Latin American giant. Brazil’s imports from Africa rose in value from US$3 billion in 2000 to US$18 billion in 2008. Nigeria, Algeria and Angola are major sources of imported oil for Brazilian businesses and households. Meanwhile, Brazil’s food producers have tapped into new markets in emerging African economies such as Egypt; exports to Africa have increased eightfold, from US$1 billion in 2000 to US$8 billion in 2008 (Financial Times, 09 February 2010).

Brazilian mining company Vale recently entered Mozambique, where it is now working alongside Odebrecht, a Brazilian construction company. Together they have developed coal reserves, built a power station and are constructing the necessary rail and port infrastructure to export the coal (lack of infrastructure remains a major development hurdle for many African nations).

Odebrecht is the largest private sector employer in Angola, where its activities range from ethanol production to supermarket construction.

Petrobras, Brazil's state-controlled oil company, is currently drilling for oil offshore in Angola.

Why is Brazilian investment so readily welcomed by African markets? "Cultural and linguistic connections have helped make Brazil's development model especially attractive in Angola and Mozambique. Historic links with Africa go back centuries. Some 1.4 million of the 3 million black African slaves sent to Brazil between 1700 and 1850 came from Angola, and in the 1820s settlers in Angola and Mozambique and other Portuguese colonies applied to join the newly independent Brazil," according to the Financial Times (23 May 2011).

Brazil’s role as a host country to African diaspora groups has helped build the cultural bridges that allow economic connections to be made. Also, as some political commentators have observed, Brazil is highly-regarded as a poverty-reduction "success story". Some African governments are of the opinion that Brazilian firms have a more insightful and sympathetic understanding of local development problems than their European rivals. High regard for Brazil throughout Africa was evidenced in 2009, when Brazil’s past president Mr Lula da Silva became the African Union’s guest of honour while visiting Libya.

Brazil, in turn, may be looking to invest in Africa on account of its own climate security concerns. In the future, warmer weather could reduce the amount of cultivable land in Brazil. Brazilian food and ethanol producer are already expanding into Africa, especially in countries such as Angola where land is plentiful.

The global reach of Rio

A very different example of Brazil’s growing global influence was recently seen at the "champagne-soaked launch party for Rio's inaugural diversity week – a celebration of the city's cultural geography and an attempt to position Rio as the global capital of gay tourism" (Guardian, 11 July 2011).

Rio’s mayor describes the city as being "without prejudice... that accepts everything with an open heart." During 2011, lesbian, gay, bisexual and transgender (LGBT)-friendly initiatives proliferated in Rio. These included anti-bullying projects aimed at gay and lesbian students and legislation outlawing discrimination in city nightclubs.

Many people in Rio are keen for the city build on its reputation as a beacon for civil rights. Businesses recognise that rebranding around the LGBT theme could become a real money-spinner. In 2009, 25% of Rio's tourists, or around 880,000 people, were gay. Many belonged to high income groups. The city's tourist board hopes to drive numbers of LGBT visitors even higher in the future

Following the collapse of the Soviet Union in 1991, Russia lost much of its global influence. Some status has since been regained on account of Russia’s strategic control of oil and gas supplies. Fuel sales account for 30% of the country’s GDP and deliver more than 40% of government revenues. However, wealth derived from sales of finite natural resources is not a long-term sustainable growth pathway. Mindful of its own vulnerability, Russia is now actively seeking out business partnerships amongst resource-rich African countries and with its own ex-Soviet neighbours.

According to the African Development Bank Group, the importance of Russia as a trading partner to African countries is fast-growing (although still small when compared to China, India, Brazil, the EU and the USA). Bilateral trade between Russia and Africa has increased ten-fold since the mid-1990s and is now approaching US$10 billion (Africa Economic Brief, 11 May 2011).

Russia’s global strategic ambitions are strongly linked with energy security concerns. The general pattern of its trade with Africa is one of raw material gains alongside Russian investment in African energy infrastructure. Large Russian TNCs such as Lukoil, Gazprom, Norilsk Nickel, Alrosa, Rusal and Severstal have invested in the exploitation of oil, gas, diamonds, aluminium and iron ore in many African countries, including:

Egypt - where Russia has signed an accord on nuclear co-operation (Russia possesses advanced nuclear technology, a legacy of the Cold War "arms race").

Nigeria - where Russian gas TNC Gazprom is chasing contracts to build a new Trans-Saharan gas pipeline which would deliver Nigerian gas to Europe.

Namibia and Angola - where Russian TNCs have invested in the mining of diamonds, metals, hydrocarbons and uranium.

‘Back in the USSR’

Recent newspaper reports suggest that, alongside African expansion, a second key geopolitical strategy is being pursued by Vladimir Putin, the Russian prime minister. He is currently engaged with building an economic trade bloc out of neighbouring former Soviet states. A customs union has already been launched between Russia, Belarus and Kazakhstan (leading to the removal of export tariffs and the growth of a common market).

Russia’s renewed geographical ambition became clear when Mr Putin recently announced that "for the first time since the collapse of the Soviet Union, the first real step has been made towards restoring natural economic and trade ties in the post-Soviet space" (Financial Times, 17 August 2011). At a recent Moscow summit, the prime ministers of the three ex-Soviet states talked of turning this new grouping of 165 million people into a "Eurasian economic union" and perhaps one day introducing a common currency.

India is home to 1.2 billion people: that’s 17.5% of the whole world’s population! A two-speed society, half its population still lives in extreme poverty, yet India is also home to 55 billionaires (the 4th highest score in the world). A source of this newfound wealth is Indian TNCs, many of which are major investors in Africa. India’s businesses, like Brazil’s, have become the beneficiaries of long-established cultural connections with African states.

India is a big player on the African investment scene, although it currently lags behind China in terms of the total value of its economic flows and interactions with Africa. China-Africa trade is worth about US$75 billion a year, whereas India-Africa trade is closer to US$45 billion. However, the figure rises rapidly each year as more Indian companies like Tata become major global brands.

Indian businesses have so far acquired or invested in around 80 new companies in Africa since 2005, with investments spread across all sectors of industry, ranging from coal mining to telecoms.

Manufacturing companies such as Tata are expanding their operations in Africa, creating secondary sector work opportunities (Tata recently made headlines in Europe too, where it purchased the UK car brands Jaguar and Land Rover).

Bharti Airtel, India’s largest cellular network operator, spent US$10.7 billion on the acquisition of Sudanese telecoms company Zain in 2010.

Indian Railways runs the networks of ten African countries as part of a long-established programme of bilateral technical and aid support.

In common with Brazilian investment, Indian money is widely welcomed in Africa and for similar reasons:

Firstly, "there are similarities in the evolutionary paths of many African countries with India’s own path, which makes it easy for Indian companies to adapt to African market realities," Manoj Kohli, chief executive of Bharti Airtel, told the Financial Times (20 May 2011). "The country and the continent have similar markets and similar challenges in terms of poor infrastructure and low-income populations. Indian businesses are keen on using their experiences at home as a blueprint for expansion in Africa."

Secondly, parts of eastern and southern Africa have for a long time been home to parts of the global Indian diaspora.

Thirdly, many African countries, like India, are places where English (or the variant form called "Globish") is widely spoken - a legacy of the British Empire that becomes a bonus when doing business.

How else does India project its global power?

Different forms of hard power and soft power support India’s global ambitions to become a new superpower.

Its army is the world’s third largest (1.3 million troops). This "hard" power gives India a formidable geopolitical presence.
India is a major provider of aid and loans to poor countries. Its government recently approved a US$5.7 billion loan package to help create 80 training institutes and a host of development projects across Africa. Tanzania alone has been granted US$180 million of Indian credit to help improve water supplies in the capital city of Dar es Salaam (following Tanzania’s widely-reported disappointments working with the UK-based company Biwater).
Indian culture - including the Bollywood film industry and its cuisine - are widely admired around the world (this is an important type of "soft" power).
India is known as "the world’s back-office", playing a major global role supporting some of the world’s largest technology, financial and media companies. Bangalore and Hyderabad are India's main information technology hubs. Business process outsourcing accounts for a quarter of all Indian exports. ICT employs two million people and creates jobs for another ten million via multiplier effects. All of which gives India an important global presence (New Statesman, 18 July 2011).

China is the world’s second largest economy and the world’s leading exporter of manufactured goods. China projects its enormous power around the world in different ways. It has steadily built up trade relationships throughout the world since 1978, notably through sales of goods to the EU, the USA and Japan. Recently, power projection has manifested itself through rising African trade and investment.

Chinese FDI worldwide amounted to just US$0.9 billion in 1990. By 2010, this had risen to a total of US£59 billion (one recent example is the acquisition of the UK’s MG car brand by the TNC Shanghai Electric).

China's investment in Africa is distributed across 49 countries, with the majority focused on South Africa, Nigeria, Zambia, Sudan, Algeria and Egypt. This activity spans all sectors of industry, including mining, financing, manufacturing, construction, tourism and farming.

The total value of all bilateral trade with Africa reached US$114.8 billion in 2010, making China the continent’s largest trading partner, outpacing the European Union and the United States (China Daily, 24 December 2010). The overall pattern is one of Chinese exports to Africa of machinery and electronic products, while China mainly imports African agricultural commodities and raw materials.

However, the pattern of Chinese investment is becoming more complex. According to The Economist (20 April 2011), 1,600 Chinese companies now use Africa as an industrial base in some way. The manufacturing share of total Chinese investment (22%) is catching up fast with mining (29%). Chinese firms are signing African infrastructure deals worth US$50 billion a year and there is increasing investment by Chinese companies in African tourism. The following examples show Chinese interactions with African countries spanning many different sectors of industry:

Primary industries China has agreed to spend up to US$23 billion to build oil refineries and other petroleum organisations in Nigeria. As well as gaining access to oil, China is in the market for uranium too. Niger is the world's second largest uranium producer and China is competing there with France for access to the rare radioactive metal. More widely, Chinese businesses have brokered infrastructure-for-resources deals all across Africa during the last decade; the hunt for oil and minerals shows no sign of slow-down.

Manufacturing and infrastructure 70 beer breweries were recently built by a joint venture between South African and China investors, while a chemical fertilizer joint venture formed by Tunisian and Chinese enterprises produces the leading fertilizer sold in China.

Tourism This is one of the most important new industries for Africa’s emerging economies and is also an important focus for Chinese investment. In 2009, some 381,000 people from China's mainland visited Egypt and 28 other African nations, while 400,000 Africans travelled to China. As part of this process of exchange, Chinese enterprises have set up travel agencies and restaurants, and are engaged in hotel building and management throughout Africa.

Other than trade, how else does China build global influence?

International aid, loans and assistance are also part of the power picture.

China has a history of involvement in Africa and first undertook major aid projects in the 1960s and 1970s, including a railroad linking Zambia and Tanzania.

In recent years, China has provided emergency relief supplies such as food and tents to Sudan, Madagascar, Burundi, Tanzania, Somalia, Ethiopia, Lesotho and Zimbabwe.

By the end of 2009, China had provided assistance for the construction of more than 500 infrastructure projects in Africa.

Between 2007 and 2009, the country offered US$5 billion in preferential loans and preferential export buyers' credit.

More than 30,000 people in Africa have attended training programs provided by the Chinese government in fields such as economics, agriculture and public administration (China Daily, 24 December 2010).

Helping boost all of this activity, both in Africa and other continents, is China Development Bank (CDR), the state-run financial institution which provides "the financial muscle" in the country’s overseas expansion drive. In the energy sector alone, CDB has awarded loans to other developing country governments or companies of more than US$65 billion in the past two years. China has made more than US$110 billion in long-term loans to developing countries over that same period, a number that exceeds the World Bank’s own lending (Financial Times, 17 January 2011).

China’s ‘hard power’ is building too

In closing, consider too how China is globally projecting greater levels of "hard power", especially in the South China Sea where it has built up naval power - allegedly in order to guarantee protection for its oil imports, thereby helping safeguard its own energy security (but upsetting the USA, whose naval supremacy is challenged).

China is also building new military alliances with Pakistan - some political analysts go so far as to refer to Pakistan as a "client state" of China (Financial Times, 01 July 2011). Sino-Pakistani deals have involved large sums of money (Financial Times, 01 July 2011):

Fighter aircraft At US$20 million per JF-17, the project could be worth as much as US$5 billion (for up to 250 jets).

When the acronym ‘Bric’ was first coined in 2001, no formal grouping of the four nations actually existed. However, driven perhaps in part by the media hype surrounding them, the four countries have met annually at a format summit meeting since 2009. This may indicate a spirit of co-operation shared amongst the rising stars. However, there is plenty of potential for conflict too.

In April 2011, the leaders of Brazil, Russia, India and China gathered for their third annual summit meeting. They were joined this time by South Africa as a fifth delegate and representative of Africa (a gesture that was widely attributed to China, which championed South Africa’s inclusion even though it is only the world’s 12th largest emerging economy; China argued that South Africa should be included as a representative of the African continent).

Under discussion at the China-based summit was how the five nations might take a more responsible role in world affairs (previously in 2010 the focus was how best to strengthen their economies and address the risk of inflation). The latest conference allowed outside observers to gain some understanding of how the relationship between the new superpowers is developing.

The Financial Times (14 April 2011) viewed China as "firmly in charge", noting that from an economic point of view, the only thing held in common by Russia, Brazil, India and South Africa is the importance of their own trade relationship with China. "This isn’t a fast-integrating, unified economic bloc," one senior economist said. "It’s a group of four geographically and commercially diverse countries that each have a growing bilateral relationship with the fifth one."

China is certainly the hub for the Bric(s) network. The value of trade between Russia, Brazil and India amounts to about 3%; whereas it is 12% with China. Moreover, the trade is "unbalanced in China’s favour, with exports to China made up largely of natural resources and imports from China mostly composed of finished manufactured goods."

Signs of cooperation and interdependency

The economies of the four (or five) nations are increasingly interconnected and interdependent (albeit in the form of a network focused around China). Bilateral trade of US$60 billion between China and India was recorded in 2010 (the figure was just US$20 billion as recently as 2006). A striking example of the strength of this new relationship is the recent agreement by India’s Reliance Power to purchase US$10 billion of power generation equipment from China’s state-owned Shanghai Electric (the largest single trade deal ever conducted between India and China).

The table below shows how important trade with China has become for the other Bric(s) nations since the 1990s.

One very interesting display of cooperation was seen recently. The five International Monetary Fund (IMF) executive directors representing Brazil, Russia, India, China and South Africa attacked the IMF for continuing to appoint a European as head of the fund. In a joint statement, they said: "We are concerned with public statements made recently by high-level European officials to the effect that the position of managing director should continue to be occupied by a European. The recent financial crisis which erupted in developed countries underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy" (BBC News, 25 May 2011).

Signs of rivalry and possible conflict

In contrast to occasional displays of global solidarity, it does increasingly appear that the core four Bric nations are actively competing for business and influence in Africa and elsewhere. All need to secure guaranteed supplies of raw materials to help sustain continued economic growth.

Brazil views China as a trade rival as much as a partner. It struggles to compete on an equal footing with its superpower rival. Chinese manufactured goods have, for instance, flooded the Brazilian marketplace in recent years (damaging domestic sales for Brazil’s own manufacturers). China’s trade advantage lies in the fact that there are important differences in the way that the two countries’ exchange rates are pegged to the US dollar. In September 2011, Brazil announced it would impose a 30% increase in import taxes on foreign cars - a move that will impact in particular on Chinese producers (Financial Times, 17 September 2011).

Water security concerns may undermine China’s relationship with India in coming decades. Taken together, China and India are home to 37% of the world’s population and as poverty-alleviation continues in both countries, water demands can only grow. Both nations, however, rely on run-off from the Tibetan plateau that lies mainly within the borders of China. China recently embarked on numerous dam-building projects that are a potential trigger for geopolitical conflict (see previous 59 dams feature).

There are growing military tensions between India and China (India’s defence budget is US$32 billion, China’s is US$91 billion). "Senior Indian military officers have voiced their concerns about a widening gap between India and China’s defence capabilities, as New Delhi falls behind in the modernisation of its armed forces," according to the Financial Times (06 September 2011). "Their misgivings come as China becomes more assertive across the region. Last week the Indian government acknowledged that one of its warships was challenged by the Chinese navy off the coast of Vietnam in late July. China’s foreign ministry denied that there had been a confrontation."

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